Atlas does shrug

A simple calculation is telling. Assuming no behavioural change, raising the top marginal rate from 46.5 per cent to 49 per cent for those earning above $180,000 would increase annual income tax collections by about $1.2 billion. However, if the response in Australia parallels that in Britain, instead of rising, taxes collected from top-income earners could actually fall by up to that amount. Nor is it difficult to see why: 30 per cent of the top taxpayers in Australia are 55 or over, so are making choices about how long to continue working; nearly a third are in occupations which have substantial discretion over the timing and form of income; and a majority have sources of non-taxable income which offer opportunities for rearranging tax liabilities. But while reducing the tax take, all those adjustments impose steep economic costs, with each dollar raised shrinking ­national income by at least 50c.

A simple calculation is telling. Assuming no behavioural change, raising the top marginal rate from 46.5 per cent to 49 per cent for those earning above $180,000 would increase annual income tax collections by about $1.2 billion.

Shades of the old 15% “Reservists Tax” that Keating introduced. It was supposed to raise 15million, but ended up costing 20million as now we could deduct all our expenses.

Originally the ATO disallowed a lot of deductions or reduced them by 50% until taken to court. Seems Treasury forgot that most officers in ranks from Major to Major General were lawyers , or CFO types and had their tax specialists work probono. That tax lasted a year as I recall.

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Liberty Quotes

The accord between the policy-makers, who decide their electors’ payment by taxes, and the taxpayers, who cannot assess the services of monopoly government, can be judged only by the readiness to pay taxes without question.— Arthur Seldon